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Seven Helpful Tricks To Create Your First Financial Plan

Expert Panel
POST WRITTEN BY
Forbes Finance Council
This article is more than 7 years old.

If you've ever felt overwhelmed by your finances, you're not alone. According to a recent study, one in three Americans feel they don't have a clear and accurate view of their whole financial picture, and just one in five feel "very confident" they can achieve their financial goals.

Getting a better grasp on your financial situation requires some serious analysis and planning, which can be a daunting task if you've never attempted it before. Below, Forbes Finance Council members offer their best advice for creating your first financial plan.

All photos courtesy of individual members.

1. Use The 20-30-50 Plan

Better than a budget, the 20-30-50 plan is a fun and flexible way to account for your spending. First, take your monthly after-tax earnings, and devote 20% toward bettering your financial future, like investing or paying off debt. Then, you have 30% to spend on fun. This section will have to be trimmed if you fall short. Finally, spend 50% on needs like rent, groceries, etc. - Elle KaplanLexION Capital

2. Use Your Credit Card's Spending Report Tools

Most credit card companies offer a consolidated spending report. Consolidate all spending to just one card: monthly recurring bills, dining out, travel, etc. Don't use cash except for rare nominal amounts. Doing this will automatically begin to build a visual picture of your spending patterns. Pick one day a month, and take a long hard look at the chart. You'll be surprised where it all goes. - Ivan IllanAligne Wealth Preservation & Insurance Services LLC

3. Use Envelopes Of Cash

For 10 years, my family consistently used envelopes to track spending. The awareness of cash leaving your hands has a real loss aversion effect impacting your decision making. It takes time and discipline, but use cash, divide it into categories, and put each category into a different envelope. This approach has also proven to reduce spending by 10%. - Darryl LyonsPAX Financial Group LLC

4. Create a Plan Around Three Financial Categories

Everyone should be thinking in terms of at least two or three different categories – savings/emergency fund, dream/fun/travel fund, and an investing fund. Income should be allocated to these major categories monthly, in addition to expenses and debt payments. - Ismael WrixenFE International

5. Accept Where You Are And Use Effective Tools

Examining and accepting your financial status can be intimidating and even scary for people budgeting for the first time. There's a possibility that you may not like what you see, but if you want to fix it, first you have to embrace it. Then use a financial tool like Mint.com to provide a 360-degree perspective of your financial standing. - Ryan MarquisPlastc, Inc.

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6. Automate Your Retirement Savings

Depending on your age, you may need to be putting away as much as 10 to 15% of your pre-tax compensation for retirement. If you have a retirement plan at work, make the maximum contribution allowed by IRS rules. Don't worry if your employer doesn't fully match; take as much of the employer's free money as you can, then keep adding in your own. Your retirement self will thank you. - Erik ChristmanOxford Financial Partners

7. Develop A Net Worth Statement

Start by developing a detailed net worth statement. First, list all your assets that have a reasonable sellable value. Second, list all liabilities. Net worth is determined by subtracting the total liabilities from total assets.  - Rob GabridgeGabridge & Company